Hello. I know this thread is super old, but I have not found a solution to this anywhere on the web, and I finally figured out how to solve this problem. Maybe somebody will find this useful.

Open up a command prompt from your recovery options and copy C:\Windows\System32\winevt\Logs\Application.evtx to an external disk. Get on another computer with Vista and open up Application.evtx with the Event Viewer. Find the error where SideBySide is the source in the event log and it should say something about an error in some manifest file. Now go back to your computer and replace that file on your C drive with a copy of that file from your recovery partition or recovery disk. Restart your computer and it should work.

Is there any way to do this without another Vista machine? I've got this semi-old desktop with XP Pro x64 and a new laptop with Vista. I've tried system restore and wot. I really don't want to install windows all over again, but I suppose it's better than spending hundreds of dollars with some tech guy who will do the same.

Many thanks to PJPoon for posting this fix! This problem began after uninstalling Kaspersky, which was blocking my internet access and then installing Avast!. Everything was working great until I rebooted, Interactive Logon Process Initialization Has Failed. I thought no, prob, system restore, copy over old registry hives from backreg folder, no problem. Nope! None of the Windows Repair options worked, tried them all. Typically I would try to look at the logs using Sysinternals ERD 2007, but its not compatible with Vista. There is an "unattach mode" which allows you to copy files, just can't use any of the tools or have access to the registry. So I copied the Application.evtx file to an external drive. I then attached it to another PC running Vista, copied the file to that PC and viewed the log. There were multiple Windows Logon Errors plus SidebySide errors. The SideBySide errors point to a file located in C:\windows\winsxs\manifests\x86_microsoft.windows.common(long string of numbers).manifest. I grabbed a copy of the file from the working Vista machine to the external drive. Went back to the broken machine and copied it, and presto! Logged In! I thought I was looking at a format. Thank you so much!!!!! But I think the machine may still have viruses...

Is there a way someone could give step by step instructions (for running command prompt), as in how to type the commands in DOS, and how to replace the file from the startup disk onto the c drive?

My computer just got this problem, and I am desperate not to have to reformat and loose some important files, I am just not very comfortable doing this process without a little more guidance. Any help is much appreciated.

I tried to do exactly what was explained by connectthedots. My lastest SideBySide errors (from the day that my computer started to have problems) was located in windows\system32\logonui.exe. I copied this file from a working vista computer... And nothing! I dont have the error msg 'interactive logon process failed' anymore but the boot stops at the same moment and I have a perfect black screen. I spent days trying to understand whats wrong but I have no answers. Can anyone help me please???
I would like to thank you guys for the help u already gave me. I m french and tried to find some help on french websites without succes. U are the only ones who helped me so far so Thanks!!!
Hope to read u soon!

Many thanks to PJPoon for posting this fix! This problem began after uninstalling Kaspersky, which was blocking my internet access and then installing Avast!. Everything was working great until I rebooted, Interactive Logon Process Initialization Has Failed. I thought no, prob, system restore, copy over old registry hives from backreg folder, no problem. Nope! None of the Windows Repair options worked, tried them all. Typically I would try to look at the logs using Sysinternals ERD 2007, but its not compatible with Vista. There is an "unattach mode" which allows you to copy files, just can't use any of the tools or have access to the registry. So I copied the Application.evtx file to an external drive. I then attached it to another PC running Vista, copied the file to that PC and viewed the log. There were multiple Windows Logon Errors plus SidebySide errors. The SideBySide errors point to a file located in C:\windows\winsxs\manifests\x86_microsoft.windows.common(long string of numbers).manifest. I grabbed a copy of the file from the working Vista machine to the external drive. Went back to the broken machine and copied it, and presto! Logged In! I thought I was looking at a format. Thank you so much!!!!! But I think the machine may still have viruses...

Any way you can give step by step instructions on how to do this process?

Though this is a very old topic, I had the same problem today on a computer at work with Windows 7 Pro 64 bits.
I tried applying the solution described by PjPoon with no success as the Event log would not specify any manifest file in particular. I clearly had the SidebySide errors, but no mention of manifest whatsoever.
I still tried copying some x86_microsoft.windows.common* files to the faulty computer but again, not success.

In the end, I managed to simply perform a system restore from the last critical update and the computer runs again. I still don't get what went wrong with the machine

This "old post" have saved my sister's life and maked me learn a lot... is because of this post that i had joined this comunnity so thanks a lot... (I am from Puerto Rico, so sorry for my bad english, i use to write in spanish)